1. End of the Year Agenda 32.1 Secured Debt, Unsecured Debt 32.1 Review
32.1 Quiz
32.2 Secured Debt, Unsecured Debt
32.2 Review
32.2 Quiz
32.3 Secured Debt, Unsecured Debt
32.3 Review
32.3 Quiz
Debt Protection
Chap 32 Credit, Debt, Bankruptcy Project
Chapter 32 Test
Real World Project Pt. 1
Real World Project Pt. 2
Real World Project Pt. 3
Real World Pt. 4/5 (Budget & Reflection)
Real World Project Final
Final Exam

2. CHAPTER 32 Creditors, Debtors, and Bankruptcy
11/8/2018
CHAPTER 32 Creditors, Debtors, and Bankruptcy
32-1 Legal Protection of Creditors
32-2 Legal Protection of Debtors and Credit Card Users
32-3 Bankruptcy

4. 32-1 Legal Protection of Creditors
GOALS
Recognize the value of a security interest
Contrast a secured loan with an unsecured loan
Chapter 32

5. FOCUS Do creditors need the protection of the law? Why or why not?
Chapter 32

6. Question 1: Volunteer Please Read
Norm was a foreign news correspondent for a national TV network. One afternoon he took his expensive watch to a jewelry store to be repaired. The jeweler recognized Norm and told him he watched his network. The jeweler said the watch would be ready the next day. Norm left the store. He then received a call telling him to immediately pack and head for Eastern Russia. When he went to get his watch upon his return almost 4 months later, the jeweler told him he had sold it after sending Norm 10 reminder. Norm responded that there was no mail service where he had been. The jeweler shrugged and said he was just following the state’s artisan’s lien laws. Norm’s attorney ultimately brought suit against the jewelry store for damages.
What are the jewelry store’s reasons for selling the watch?
What legal reasons support Norm’s suit?

7. Question 2: Volunteer Please Read
To finance her divorce, Larry pawned her engagement ring for $300. Three months later, when she and her husband made up, she went back to redeem the ring and was told that she now owed almost $350. Shocked, she realized that the interest rate she was being charged was nearly 72% a year.
Is this high interest rate legal?

8. 32-1 Legal Protection of Creditors
GOALS
Recognize the value of a security interest
Contrast a secured loan with an unsecured loan
Chapter 32

9. FOCUS What is a creditor? Party that is owed a debt.
Do creditors need the protection of the law? Why or why not?
Creditors will lose money
It affects everybody
Chapter 32

10. LAWS THAT PROTECT CREDITORS
Four Types of Laws that Protect Creditors:
Laws allowing secured debts
Laws involving third parties
Laws concerning unsecured debts
Laws allowing garnishment of wages
Chapter 32

11. LAWS THAT PROTECT CREDITORS
What is secured debt?
Taking security interest in personal property or fixtures
Or mortgage on real property
Default = Creditor can sell property in order to repay loan
Chapter 32

12. LAWS THAT PROTECT CREDITORS
Some secured debts arrangements allow the creditor to have voluntary possession of property until debt is paid
Pledges
Pledgee
Pawn
Pledgee (creditor)
Pledgor (debtor)
Pledgor
Chapter 32

13. LAWS THAT PROTECT CREDITORS
Pawn Shops are legally regulated
Tangible Goods
High Risks = High Reward (60 – 72%)
Broker must be licensed
Keep accurate records
Allow police inspection
Goods must be held for specific amount of time before being sold
Chapter 32

14. Review
Secured Debt
Creditor
Pawn
Pledge
Pledgor
Pledgee
Chapter 32

15. LAWS THAT PROTECT CREDITORS
What is a lien?
Legal right in another’s property as security for the performance of an obligation (loan repayment)
Chapter 32

16. LAWS THAT PROTECT CREDITORS
Two types of Involuntary liens:
Mechanics Lien
-Real Property
Artisan Lien
Services associated with personal property
Lien holder retains possession of property
Chapter 32

17. LAWS THAT PROTECT CREDITORS
Laws involving third parties
Suretyship: contractual relationship where third party takes responsibility for unpaid debts
Three parties involved
Principal Debtor
Creditor/Obligee
Surety
Cosurety
Chapter 32

18. LAWS THAT PROTECT CREDITORS
Guaranty
Similar to a surety
Guarantor is only secondarily liable
Creditor must sue debtor first and prove debt is uncollectible
No suit necessary in a surety
Chapter 32

19. LAWS THAT PROTECT CREDITORS
Laws concerning unsecured debts
Small debts
Based off of credit
Oral or written promise
Riskier for creditors
Debtors can file bankruptcy
Chapter 32

20. LAWS THAT PROTECT CREDITORS
Laws allowing garnishment of wages
Up to 25%
Taxes
Child Support
Chapter 32

21. Page 574 #1-8
Frayer Model
Chapter 32

22. 32-2 Legal Protection of Debtors and Credit Card Users
GOALS
Discuss the various areas of debtor protection available under the law
Relate the protections afforded credit card users under the law
Chapter 32

23. FOCUS
How does the Truth in Lending Act protect debtors?
Chapter 32

24. DEBTOR PROTECTION Laws setting maximum interest rates
Laws requiring disclosure of terms
Laws challenging unconscionable contracts
Laws prohibiting abuses in the credit system
Laws requiring notice of debt payment to be recorded
Laws allowing debtors to cancel debts and start over
Chapter 32

25. LAWS PROHIBITING ABUSES IN THE CREDIT SYSTEM
Federal Equal Credit Opportunity Act
Federal Fair Debt Collection Practices Act
Federal Fair Credit Billing Act
Federal Fair Credit Reporting Act
Credit Repair Organizations Act
Chapter 32

26. Laws Setting Maximum Interest Rates
Usury Laws: set maximum interest rates
Loans of Money
Chapter 32

27. Laws Requiring Disclosure of Terms
Consumer Loan: Person borrows money primarily for personal, family, etc.
Aka: Personal Loan
Truth in Lending Act
Protector debtors from creditors
Full Disclosure- interest and finance charges
Chapter 32

28. Laws Requiring Disclosure of Terms
Finance Charge: is the total added cost when a person pays in installments
Creditor must state interest rate (APR)
Cash price
Down payment/trade-in allowance
List of finance charges
Total amt financed
Chapter 32

29. Truth in Lending Act (cont.)
Consumer Leasing Act
Protects Lessee
Chapter 32

30. Laws Challenging Unconscionable Contract
Contracts that offends an honest person’s conscience/sense of justice
Grossly fair and oppressive
Judge can:
Refuse to enforce the contract
Remove the unconscionable clause
Limit the clause’s application
Chapter 32

31. How credit works
Chapter 32

32. Assignment Go to the internet and find 10 credit card interest rates.
Chapter 32

33. Name at least four of the six approaches the law takes to protect debtors.
Chapter 32

34. PROTECTIONS FOR CREDIT CARD USERS
Issuer of card specifies the limit of available credit
Cardholder is liable for all purchases
Liability limited under certain conditions
Chapter 32

35. What is the liability limit for unauthorized credit card charges?
Chapter 32

36. 32-3 Bankruptcy
GOALS
Differentiate between the various types of bankruptcy filings
List the stages of the Chapter 7 bankruptcy procedure
Chapter 32

37. FOCUS
Is bankruptcy fair?
Chapter 32

38. THE BANKRUPTCY ACT Chapter 7 Liquidation, or “straight bankruptcy”
Reorganization
Chapter 12
Debt relief for family farms
Chapter 13
Extended time payment plan
Chapter 32

39. Of the various bankruptcy plans, which one involves total liquidation of the debtor’s nonexempt assets?
Chapter 32

40. BANKRUPTCY PROCEDURE UNDER CHAPTER 7
The bankruptcy petition
Voluntary bankruptcy
Involuntary bankruptcy
Required informational filing
Selection of the trustee in bankruptcy
Non-dischargeable debts
Exempt property
Liquidation and distribution of proceeds
Chapter 32

41. What are the two types of bankruptcy under Chapter 7?